Nords are very racist. I guess lore gets bent into game mechanics.
I dont find the backstory very compelling. What they did was to create the framework of the game, which really didnt require much thought because it was DAOC, and then they just warped the lore to fit it. Very lame and it reminds me of Battlespire years ago.

Racism is a very cultural thing, and cultures change constantly. With the Nords, because their religion is being oppressed due to the White Gold Concordant they have turned very inward and are rejecting everything that comes from the outside.
Their cultural identity is being oppressed by an outside force, so they reject all outside forces.
For a historical example, Germany wasn't any more racist that the other nations around them, however before the second world war their economy collapsed and there was a great crisis. And as human nature goes, people always look for something to blame, and usually blame it on something that they cannot identify with or doesn't fit in their world view at that time.
Look at the Netherlands for example. In the past they have welcomed many outsider and gave them a home. However now over the past few years there have been many racially motivated politicians in The Netherlands. And also people paid more attention to them.
This is a sudden cultural shift, and with that also comes different values for some people.